Derivative Financial Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, the Company uses derivative financial instruments to mitigate its exposure to commodity price risk associated with oil, natural gas and NGL prices. The Company records derivative financial instruments on its consolidated balance sheets as either assets or liabilities measured at fair value. The Company has elected not to apply hedge accounting for its existing derivative financial instruments. As a result, the Company recognizes the change in derivative fair value between reporting periods currently in its consolidated statements of operations as an unrealized gain or loss. The fair value of the Company’s derivative financial instruments is determined using industry-standard models that consider various inputs including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. The Company has evaluated and considered the credit standings of its counterparties in determining the fair value of its derivative financial instruments.

At December 31, 2022, the Company had one costless collar open and in place to mitigate its exposure to natural gas price volatility, with a specific term (calculation period), notional quantity (volume hedged) and price floor and ceiling. At December 31, 2022, the contract was set to expire during the first quarter of 2023. The Company had no open contracts associated with oil or NGL prices at December 31, 2022.

 The following is a summary of the Company’s open costless collar contract at December 31, 2022.

		Notional Quantity (MMBtu)	Weighted Average Price Floor ($/MMBtu)		Weighted Average Price Ceiling ($/MMBtu)		Fair Value of Asset (Liability) (thousands)
Commodity	Calculation Period
Natural Gas	01/01/2023 - 03/31/2023	2,400,000	$	6.00	$	14.00	3,931
Total open costless collar contracts							$	3,931

Between December 31, 2022 and February 21, 2023, the Company entered into a Waha-Henry Hub basis swap contract for natural gas. The basis swap contract included approximately 16,700,000 MMBtu for February 2023 to December 2023 with a fixed price of ($1.85) per MMBtu.

The Company’s derivative financial instruments are subject to master netting arrangements, and the Company’s counterparties allow for cross-commodity master netting provided the settlement dates for the commodities are the same. The Company does not present different types of commodities with the same counterparty on a net basis in its consolidated balance sheets.

The following table presents the gross asset and liability fair values of the Company’s commodity price derivative financial instruments and the location of these balances in the consolidated balance sheets as of December 31, 2022 and December 31, 2021 (in thousands).

Derivative Instruments	Gross amounts recognized		Gross amounts netted in the consolidated balance sheets		Net amounts presented in the consolidated balance sheets
December 31, 2022
Current assets	$	3,931	$	—	$	3,931
Current liabilities	—		—		—
Total	$	3,931	$	—	$	3,931
December 31, 2021
Current assets	$	215,145	$	(213,174)	$	1,971
Current liabilities	(230,023)		213,174		(16,849)
Total	$	(14,878)	$	—	$	(14,878)

The following table summarizes the location and aggregate gain (loss) of all derivative financial instruments recorded in the consolidated statements of operations for the periods presented (in thousands).

		Year Ended December 31,
Type of Instrument	Location in Statements of Operations	2022		2021		2020
Derivative Instrument
Oil	Revenues: Realized (loss) gain on derivatives	$	(75,806)	$	(194,058)	$	38,937
Natural Gas	Revenues: Realized loss on derivatives	(81,677)		(26,047)		—
Realized (loss) gain on derivatives		(157,483)		(220,105)		38,937
Oil	Revenues: Unrealized gain (loss) on derivatives	14,727		26,857		(37,703)
Natural Gas	Revenues: Unrealized gain (loss) on derivatives	4,082		(5,846)		5,695
Unrealized gain (loss) on derivatives		18,809		21,011		(32,008)
Total		$	(138,674)	$	(199,094)	$	6,929